Price Gaps between Traditional and Short Sale Shrinking

According to a report released by real estate tracking firm RealtyTrac, the price gap between Orlando traditional and foreclosures and short sales has shrunk considerably. In 2010, there was only a 24 percent difference between these two types of properties for sale compared to 30 percent the previous year.

The gap is expected to further shrink this year as more and more traditional home sellers will be forced to lower their selling prices after finding out that their home’s market value declined. If this happens, distressed property sellers including foreclosures and short sales will no longer be able to offer bigger discounts since they will be competing with the traditional home sales.

Experts also believe that even if the percentage of these distress sales rises, discounts will still come down. Only when more than half of the total home sales involve short sales and foreclosures will there be adjustments with the regular properties.

Last year, 20, 418 distressed homes were sold in the counties of Orange, Osceola, lake and Seminole with an average sales price of $111,938, down from $122, 688 for 2009. Metro Orlando is among the areas that showed a modest price decline as well as increase in home sales. Median home price dropped to $119, 700 from $123,500 for 2009.

On the other hand, the Orlando Regional Realtor Association recently reported that at least 75 percent of the existing home sales in the Orlando housing market actually involved properties in distress and 50 percent of the closings were short sales or foreclosures. The difference in the figures between the two reports can be attributed to the sources.

RealtyTrac relies on deeds publicly filed while the Realtors rely on members sales. RealtyTrac also does not consider a property is in short sale if the owners are not in default. Meanwhile, Realtors will consider the sales transaction to be a short sale if the home is sold at less than the amount owed in mortgage even if the owner is not in mortgage default.

http://www.orlandosentinel.com/business/os-florida-home-sales-january-20110223-8,0,1758017.story

Over 40% South Florida Borrowers Are Underwater

The housing market problem is not actually only confined to borrowers having trouble with their mortgage payments. There is also a growing number of homeowners who are finding themselves with a home whose property has declined at a level which left them with more debt than home equity.

Since 2006, the amount of home equity lost in Florida has reached $113 billion. In addition, home prices have declined by almost 55 percent while 43 percent of South Florida homeowners are said to be underwater.

It is therefore not surprising why more and more homeowners are choosing a strategic default. Basically, these borrowers have lost all hope they will ever recover the equity they lost and are allowing banks to foreclosure. Before, such a mortgage default was thought to be unthinkable but considering its growing popularity, it is starting to become the norm in some areas.

A Mortgage Bankers Association report releases last week revealed that 25 percent of the nations’ foreclosures are in Florida. And of the total Florida foreclosures, 25 percent is said to be under the strategic default category. In the past years, walk always have increased 50x which clearly shows how homeowners are responding to their situation.

It takes an average of 25 months for a bank to complete the foreclosure process and during these months, the homeowner tries to save up money, instead of working with their lender, so they will be prepared once they are evicted.

If you are thinking about doing a strategic default, you should know that it does not come without any consequences. For starters, your credit score will be adversely affected and you will surely find it hard to take out a loan next time you are in the market to buy a home. In addition, lenders in Florida have the right to pursue deficiency judgment after you defaulted.

A short sale is considered to be the middle road between the strategic default and actually paying your mortgage debt. In 2010, 20 percent of the total existing homes sales involved short sale transactions. Aside from the fact it is kinder to your credit; lenders may not pursue a deficiency judgment leaving you with zero mortgage debt.

Short Sales: The Best Exit Strategy

Homeowners who took out mortgage loans and found themselves unable to keep up with the mortgage payments due to illness, loss of job or divorce will be glad to know there is a great exit strategy — a short sale.

In addition to distressed borrowers, a short sale is also a great problem solver for homeowners who are underwater on their mortgage or owes more than what their home is worth in the market. Before even thinking about going to your lender to discuss this foreclosure alternative, you should speak with people versed in the industry first.

Tax Lawyer
There could be tax repercussions if you choose to sell your home via a short sale. It is likely the IRS will consider the difference between the proceeds of the short sale and the amount you owe in mortgage as income and thus, be taxed accordingly. One way you can get around this issue is by proving you are insolvent, meaning you have more liabilities than assets, before the short sale proposal was approved by your lender. Talking with a tax lawyer will help you determine if you are indeed insolvent according to IRS standards.

Short Sale Realtor
Hiring a real estate agent is not enough especially since you will not merely be selling your home. You will need a Realtor who is experienced and knowledgeable about short sale transactions in order to protect your rights. Your Realtor will be able to help you prepare all the financial documents, find a buyer and negotiate with the lender. Also, a short sale might take longer than a regular transaction so, your Realtor must be there with you every step of the way.

Lender
Negotiating a short sale with your lender will certainly be tricky since banks analyze your financial situation and will more likely think you just needed to get out of your mortgage obligations. From the onset, be honest about your finances and provide proof of such hardships. It is the only way your lender will consider you a candidate for a short sale. If they see that you have been buying luxury items and these are the reasons why you could no longer afford your mortgage, chances are your short sale proposal will be rejected.

Low Priced Short Sales Attract More Buyers in 2010

A report from Zillow revealed how short sales are became the favorites of home buyers last year. Traditional home sellers are even looking at short sale properties as competition, prompting one out of five sellers to slash prices by an average of 9.4 percent.

The large volume of distressed properties which includes short sale has actually dragged down home prices in South Florida. In fact, property values are now at a level similar to what it was in 2002. Nationwide, home values have dropped 27 percent from its peak in 2006.

In South Florida, home values dropped by 3.3 percent further during the last quarter of 2010. Home sellers had no choice but to sell their homes even if they knew they wree on the losing end of the sale.

Property value index for Broward and Miami-Dade Counties dropped by 15.4 percent to $139, 000 compared to the previous year. In South Florida, home values declined by 54.7 percent. It is actually the market which showed a large drop in home values among the top 25 markets Zillow covers.

On the other hand, the number of underwater homeowners or those who owe more on mortgage debt compared to the current value of their home has increased to 42.8 percent. Obviously, this does not bode well for the local housing market, especially if a significant percentage of these homeowners decide to simply walk away from their homes.

During the last quarter of 2010, the number of foreclosure filings actually slowed down as lenders dealt with allegations of irregularities in their foreclosure process including the controversial robo-signing.

For the month of December, short sale transactions accounted for 46.7 percent of the total home sales. This is slightly higher than 2009’s 46.2 percent. Although many consider short sales to be better than foreclosure, the process itself comes with a fair share of difficulties and challenges. Some homeowners were even forced to miss payments so the lender will agree to a short sale, but this ultimately damages one’s credit, although less than what a foreclosure can do.

Reference: http://www.miamiherald.com/2011/02/09/2057082/s-fla-home-values-continue-to.html

Short Sales Are Bargains Worth Your Time and Money

In real estate, a short sale usually means the sale of a property at an amount less than what is owed to the mortgage lender. Of course, the lender needs to approve the transaction since they are the ones who would not be able to recover their losses.

Form a buyers’ perspective, a short sale offers them the chance to buy a home at a bargain price. It might take awhile but if you think about it, the waiting is certainly worth your time and especially money. You may not be able to find such a good deal as the one offered in a short sale transaction.

In Daytona Beach, for instance, a 28-year old woman was able to buy a short sale property, priced quite inexpensivley. The original homeowner owed their lender $160,000 but the buyer only paid $95,000. In many cases, the lenders do not go after the difference anymore or simply waive their right to file for a deficiency judgment. This is not the case in all circumstances but there is a little shift happening. After all, at the end of the day, a short sale is so much better than a foreclosure.

With a foreclosure, the lender will have to shell out money for the property’s upkeep on top of the cost of foreclosure. There are also expenses in terms of having the property listed and other sales-related fees. According to the Daytona Beach Area Association of Realtors, about 50 percent of the homes bought are either short sale of foreclosure. Local Realtors handle more short sale transactions — about 50 to 90 percent of their total sales activity.

Buyers do have to keep in mind a short sale is not as simple as it sounds. Even agents and short sale Realtors have just started to understand the process especially since short sale transactions were not as popular as today. You may even read about stories where the buyers waited for 1 ½ years only for the lender to reject the offer.

Florida short sales, on the average, take about six months to complete, but as lenders become familiar with how they will handle the paperwork, answer messages and phone calls and basically be more prepared, it can be assumed the processing period will be shortened. Compared to how short sales were handled three years ago, you can also see there is a marked improvement.